Advanced Search
MyIDEAS: Login to save this paper or follow this series

Imperfect information, wage formation, and the employability of the unemployed

Contents:

Author Info

  • Eriksson, Stefan

    ()
    (IFAU - Insitute for Labour Market Policy Evaluation)

Abstract

This paper considers the optimal hiring strategy of a firm that is unable to observe the productive abilities of all its applicants. Whom the firm considers as hireable, will depend crucially on the extent to which the firm can use its wage setting to mirror productivity differences. However, when setting its wages the firm has to consider other factors as well, e.g. turnover, that may make it optimal not to set wages that fully reflect productivity differences. Instead, it may be optimal to avoid hiring workers that have certain characteristics; i.e. to use a discriminatory hiring strategy. In the paper it is shown that discrimination based on employment status is an equilibrium hiring strategy even when the firm is free to set different wages for workers with different expected productivities. It is also shown that if all firms use such hiring procedures this will have strong implications for the aggregate economy and welfare.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ifau.se/upload/pdf/se/2002/wp02-17.pdf
Download Restriction: no

Bibliographic Info

Paper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2002:17.

as in new window
Length: 41 pages
Date of creation: 28 Oct 2002
Date of revision:
Handle: RePEc:hhs:ifauwp:2002_017

Contact details of provider:
Postal: IFAU, P O Box 513, SE-751 20 Uppsala, Sweden
Phone: (+46) 18 - 471 70 70
Fax: (+46) 18 - 471 70 71
Email:
Web page: http://www.ifau.se/
More information through EDIRC

Related research

Keywords: Hiring; imperfect information; discrimination; employed job seekers; efficiency wages; turnover; unemployment; welfare; policy;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Gottfries, Nils & Sjöström, Tomas, 1998. "Insider Bargaining Power, Starting Wages, and Involuntary Unemployment," Working Paper Series 1998:10, Uppsala University, Department of Economics.
  2. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
  3. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 637-55, June.
  4. Agell, Jonas & Lundborg, Per, 1999. "Survey evidence on wage rigidity and unemployment: Sweden in the 1990s," Working Paper Series 1999:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  5. Barron, John M & Berger, Mark C & Black, Dan A, 1997. "Employer Search, Training, and Vacancy Duration," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 167-92, January.
  6. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," Working Papers 629, Princeton University, Department of Economics, Industrial Relations Section..
  7. Barron, John M & Bishop, John, 1985. "Extensive Search, Intensive Search, and Hiring Costs: New Evidence on Employer Hiring Activity," Economic Inquiry, Western Economic Association International, vol. 23(3), pages 363-82, July.
  8. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-99, April.
  9. Michael Sattinger, 1993. "Statistical Discrimination with Employment Criteria," Discussion Papers 93-01, University at Albany, SUNY, Department of Economics.
  10. Eriksson, Stefan & Gottfries, Nils, 2000. "Ranking of Job Applicants, On-the-job Search and Persistent Unemployment," Working Paper Series 2000:3, Uppsala University, Department of Economics.
  11. Eriksson, Stefan, 2001. "Skill loss, ranking of job applicants, and the dynamics of unemployment," Working Paper Series 2001:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  12. Pissarides, C. & Wadsworth, J., 1988. "On-The-Job Search: Some Empirical Evidence," Papers 317, London School of Economics - Centre for Labour Economics.
  13. George A. Akerlof & Andrew K. Rose & Janet L. Yellen, 1988. "Job Switching and Job Satisfaction in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 495-594.
  14. John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
  15. Kugler, Adriana D. & Saint-Paul, Gilles, 2000. "Hiring And Firing Costs, Adverse Selection And The Persistence Of Unemployment," CEPR Discussion Papers 2410, C.E.P.R. Discussion Papers.
  16. Dickens, William T, et al, 1989. "Employee Crime and the Monitoring Puzzle," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 331-47, July.
  17. Boeri, Tito, 1998. "Enforcement of Employment Security Regulations, On-The-Job Search and Unemployment Duration," CEPR Discussion Papers 1850, C.E.P.R. Discussion Papers.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan C., 2001. "Optimal Unemployment Insurance with Monitoring and Sanctions," IZA Discussion Papers 401, Institute for the Study of Labor (IZA).
  2. Eriksson, Stefan & Gottfries, Nils, 2000. "Ranking of job applicants, on-the-job search, and persistent unemployment," Working Paper Series 2000:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. Eriksson, Stefan, 2001. "Skill loss, ranking of job applicants, and the dynamics of unemployment," Working Paper Series 2001:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  4. Forslund, Anders & Gottfries, Nils & Westermark, Andreas, 2005. "Real and Nominal Wage Adjustment in Open Economies," Working Paper Series 2005:18, Uppsala University, Department of Economics.
  5. Stefan Eriksson & Jonas Lagerström, 2006. "Competition between Employed and Unemployed Job Applicants: Swedish Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(3), pages 373-396, October.
  6. Nisar Ahmad, 2014. "State Dependence in Unemployment," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 93-106.
  7. Néria Rodréguez-Planas, 2011. "Displacement, Signaling, and Recall Expectations," Working Papers 550, Barcelona Graduate School of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hhs:ifauwp:2002_017. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Margareta Wicklander).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.